January 2012, Volume 18, Number 1

Poverty, Mobility

Some 51 million people lived in non-metro counties in 2010, about 16 percent of the 308 million US residents. Non-Hispanic whites were 80 percent of non-metro and 60 percent of metro residents.

The non-metro population rose by four percent between 2000 and 2010, less than half of the 11 percent increase in metro counties. In the most rural non-metro counties, those not adjacent to metro areas and without an urban area of at least 2,500 people, the population declined by over one percent between 2000 and 2010.

Most high-value fruit, vegetable and horticultural specialty crop production, and the farm workers who do much of the work on such farms, are in metro counties.

Poverty. The Census Bureau in November 2011 released a Supplemental Poverty Measure that includes the value of food stamps and housing subsidies in income, accounts for variations in the cost of both medical care and work-related expenses, adjusts the poverty line for the lower cost of living in non-metro areas, and makes several other changes to the definition of poverty. The US poverty rate of 15.2 percent (46.6 million people) under the traditional measure, which is an income less than three times the cost of a minimally adequate diet, rose to 16 percent under the SPM.

The SPM lowers the poverty rate for children, who receive social safety net benefits such as health care, school lunches and Food Stamps, and raises the poverty rate of the elderly because of their higher medical expenses. The poverty rate of Blacks fell more than the poverty rate of Hispanics under the SPM because more Hispanics are immigrants who are not eligible for social safety net benefits. Finally, non-metro poverty fell more than metro poverty under the SPM because of the lower cost of living in rural areas.

The expansion of two federal welfare programs, food stamps and the earned-income tax credit, are credited with doing the most to reduce US poverty.

Some 51 million US residents have incomes between 100 and 150 percent of the poverty line, which was $22,314 for a family of four in 2010. These so-called near poor include about 10 million people who are above the poverty line because they receive government benefits and 14 million who live in households that include a full-time worker. About 10 million near-poor residents own their homes and have no mortgage.

The Temporary Assistance for Needy Families program, the federal-state program created by welfare reforms in 1996, did not expand significantly despite the 2008-09 recession. There is no apparent link between the increase in unemployment by state between 2007 and 2010 and the rise in TANF caseloads by state. In Arizona, the TANF caseload fell almost 50 percent between 2007 and 2010 even though the unemployment rate more than doubled. Oregon, which had a 70 percent increase in TANF caseload between 2007 and 2010, had a smaller increase in unemployment.

California, with almost a third of the TANF caseload in the US, had 80 percent of poor families receiving TANF payments. In Texas, by contrast, less than 10 percent of poor families received TANF payments.

Analysts suggest two reasons for unemployment rising more than TANF caseloads across states. First, more single parents may be receiving unemployment insurance benefits, which can substitute for TANF payments and are available for 99 weeks. Second, low TANF benefits and policies that discourage enrollment may have curbed growth in TANF caseloads. In 1996, over 80 percent of families eligible for welfare assistance were enrolled in TANF, compared to 40 percent in 2005.

Mobility. The US has long seen itself as the land of opportunity, the country in which the poor can, through hard work, become rich. However, new research suggests that upward mobility from the bottom of the economic ladder may be greater in Europe than in the US. The Economic Mobility Project of the Pew Charitable Trusts (www.economicmobility.org) says that almost two-thirds of those born in the top fifth of incomes stay in the top two-fifths, and two-thirds of those born in the bottom fifth stay in the bottom two-fifths.

For example, more than 40 percent of American men born into the bottom fifth of incomes stay there as adults, compared to less than 30 percent in Scandinavian countries. Similarly, less than 10 percent of US men born into the bottom fifth of the income distribution rose to the top fifth, compared to over 10 percent in Scandinavia.

Reasons for low US economic mobility include more acute poverty, more single mothers, and the high wages of college graduates relative to other workers, that is, few of those from the bottom rungs of the income ladder complete college. Inequality also plays a role, since moving from the bottom of the US income distribution requires more income than moving up from more equal incomes in Scandinavian countries. African-Americans in the US face an especially difficult challenge moving up the economic ladder.

Most mobility studies measure relative mobility, asking whether children stay in the same fifth of the income distribution as their parents. The US stands out for having a very high share of those born into the bottom and top fifths of the income distribution remain there. Some argue that a better measure is absolute mobility, that is, do children have more income than their parents? With economic growth, children in the bottom fifth of the income distribution should have more income than their parents.

The US is experiencing job polarization, meaning that a growing number of jobs are at the top and bottom of the wage ladder. The fastest US job growth between 1980 and 2010 was in occupations that had higher than average wages, such as computer and math occupations, and in occupations with lower than average wages, such as building and maintenance, farming, health support, personal care and food preparation.

Occupations that exemplify the disappearing middle-of-the-job distribution include machine operators and administrative support workers. In 1980, 10 and 18 percent of US workers, respectively, were in these occupations; by 2009, it was four and 14 percent. In 2009, about 15 percent of US jobs were considered high skill and 17 percent were considered low skill. http://libertystreeteconomics.newyorkfed.org/2011/11/job-polarization-in-the-united-states-a-widening-gap-and-shrinking-middle.html)

Middle-class Blacks, many of whom worked for state and local government agencies, were especially hard hit by the 2008-09 recession and the shrinking of public sector employment. The unemployment rate for Blacks is about twice that of whites, 15 percent compared to eight percent in October 2011. Blacks, who found jobs in the US Postal Service beginning in the second half of the 19th century (a quarter of Postal Service employees are Black), have long looked to government jobs to achieve middle-class incomes. With state and local governments running deficits, public sector layoffs are frequent and long-lasting.

Development. A review of subsidies to attract or retain firms that create jobs in disadvantaged areas found that many of the promised jobs do not materialize. Good Jobs First reported that many subsidies for job creation are windfalls for particular firms. For example, Sears and the Chicago Mercantile Exchange in Illinois received tax breaks after they threatened to leave the state. State tax breaks help to explain why some Fortune 500 companies paid no state corporate income taxes in recent years.

Many corporations ask state and local governments to pay for customized training of the workers they hire when they open or expand a plant. The New York Times on January 8, 2012 reported that North Carolina is providing over $5 million worth of training for some 400 full-time workers expected to be employed in a new $426 million Caterpillar plant in Winston-Salem. The state provided a total of $51 million in incentives to Caterpillar.

Dell received $2 million in training for a 1,000-employee North Carolina plant that closed after five years. Some of the ex-Dell employees complain that the training they received to work at Dell is not valued by other employers.